Revenue of Indian logistics companies to fall 6-8% in FY2021: ICRA

April 23, 2020: In its new Q3 FY2021 update of the credit rating agency, ICRA predicts revenue of Indian logistics companies to decline 6-8 percent in the financial year 2021. Though it comes in the backdrop of Covid-19 pandemic and 40-day lockdown, medium-term growth prospects of the sector remain comfortable, supported by demand and supply-side stimulants.

The near -term prospects of the domestic freight transportation sector have been adversely impacted by the rapid rise of Covid -19 pandemic in the country, and the 40 -day lockdown imposed in order to curb it. With restrictions on the production of non -essential goods, and shortage of fleet and drivers to move essentials, besides the associated slowdown in economic activity, the near -term implications on the sector are negative.

Mr. Shamsher Dewan, Vice President, ICRA, shares his views on the impact of lockdown on the supply chain and logistic sector.#ICRAViews #SupplyChain #LogisticSector #Lockdown #Coronavirus #Covid19 pic.twitter.com/MV5kRnT5g5

— ICRA (@ICRALimited) April 22, 2020

“This would further add to the woes of the sector, which was already dealing with subdued demand over the past few quarters. Growth in the domestic freight transportation sector entered negative territory in Q3 FY2020 with revenues contracting by 2.6 percent YoY. This was on account of the continued weakness in economic activity and consumer sentiments, leading to subdued freight availability and moderation in freight rates,” says the report.

“Despite the negative operating leverage, operating profit margin of leading logistics companies increased marginally to 8.8 percent in Q 3 FY2020 from 8.6 percent in Q2 FY2020 supported by cost -rationalization measures adopted by most players amidst a muted demand scenario,” the report continued.